the marginal utility of money

[blazespinnaker]

there is this theory in economics that the marginal utility of money decreases as you have more and more of it.

For example, 1M would mean a lot, but 10M would not.

I guess who wants to be a millionaire really plays up that point .. why bother with the next question if you've won enough money to pay off that bookie who wants to break your legs!

I think this also is why we're having an increasing disparity between the rich and the not so rich. A lot of our necessary needs are being taken care of. We live long lives and while extra medicare would be nice, it doesn't really make us live that much longer or better in some cases.

Food is plenty (check out the obesity rates, even among the poor). It'd be nice to own your own house, of course, but hey people can generally find safe shelter, at least where I live.

So the question becomes, do you really want to give up your life and work another 20 hours in a job you hate so you can brag that you own your own house or you've got a nice car? For some, the answer is yes, but I think for the vast majority, people just want security for themselves and their family and after that they'd rather have time to spend with that family and their friends doing things they want to do.

So as our ability to provide basic necessities increase (through efficiences, automation, globalization) I imagine that salaries are going to decline in REAL terms. Why? Because the real value of necessities are declining and because as i said above, once you've taken care of the requirements, do you really want to waste your life working for the man?

Me, I'd rather be out gardening, paddle boarding, hiking and just enjoying life with kids, wife and friends.

[jk]

Re: the marginal utility of money

there is this theory in economics that the marginal utility of money decreases as you have more and more of it.

For example, 1M would mean a lot, but 10M would not.

I guess who wants to be a millionaire really plays up that point .. why bother with the next question if you've won enough money to pay off that bookie who wants to break your legs!

I think this also is why we're having an increasing disparity between the rich and the not so rich. A lot of our necessary needs are being taken care of. We live long lives and while extra medicare would be nice, it doesn't really make us live that much longer or better in some cases.

Food is plenty (check out the obesity rates, even among the poor). It'd be nice to own your own house, of course, but hey people can generally find safe shelter, at least where I live.

So the question becomes, do you really want to give up your life and work another 20 hours in a job you hate so you can brag that you own your own house or you've got a nice car? For some, the answer is yes, but I think for the vast majority, people just want security for themselves and their family and after that they'd rather have time to spend with that family and their friends doing things they want to do.

So as our ability to provide basic necessities increase (through efficiences, automation, globalization) I imagine that salaries are going to decline in REAL terms. Why? Because the real value of necessities are declining and because as i said above, once you've taken care of the requirements, do you really want to waste your life working for the man?

Me, I'd rather be out gardening, paddle boarding, hiking and just enjoying life with kids, wife and friends.

1. you mean 10m would mean less than 10 x what the 1st million would mean.
2. i think your overall comment is part of a movement by many on this board to blame unemployment on the unemployed, define unemployment as voluntary laziness, and thus avoid facing just how bad these times are for many.

[blazespinnaker]

Re: the marginal utility of money

1. Yeah, if you were guaranteed 1M if you worked 60 hours a week for 10 years in a job you hated, and 2M if you worked 20 years in a job you hated, most people would just work the 10 years.

2. Not at all. i'm talking about declining real value of salaries. Unemployment is caused by other factors ... well, no, this causes unemployment indirectly. We have overcapacity because the world is meeting the majority of the needs of americans. There isn't any real desire or demand to work more in order to buy what you need beyond walmart. American's produce goods, but nobody is buying them... because nobody really cares. I certainly don't!

These are bad times for sure. people WANT to work.. but there is no WORK to be had because nobody really needs anything you can produce.

You could try go working on a farm, but you have to compete with cheap immigrant labor there. Build houses? heheheh .. I think we have enough of those. CLothes? it's all being made SUPER cheap in China.

Seriously, what job are you going to do that we need? Nothing that I want to kill myself working for.

some people might argue medicare, but really, beyond what you can get for free isn't going to increase your life span all that much.

If you have to work 10% of your waking life to increase your life span by 5% .. what's the point?

[Chris]

Re: the marginal utility of money

These are bad times for sure. people WANT to work.. but there is no WORK to be had because nobody really needs anything you can produce.

You could try go working on a farm, but you have to compete with cheap immigrant labor there. Build houses? heheheh .. I think we have enough of those. CLothes? it's all being made SUPER cheap in China.

Seriously, what job are you going to do that we need? Nothing that I want to kill myself working for.

some people might argue medicare, but really, beyond what you can get for free isn't going to increase your life span all that much.

If you have to work 10% of your waking life to increase your life span by 5% .. what's the point?

I give you, Apple products: http://www.guardian.co.uk/business/2...e-tablet-sales

Enough people still want things like these and are willing to work in misery at jobs they hate for them. Why is that?

[blazespinnaker]

Re: the marginal utility of money

Well, there are obviously exceptions to this rule.

However, I believe the fact remains.. people (in general) do not want to work extra hard to buy crap they don't need (in general).

Right now, the US doesn't produce anything people really need. Well, not entirely true of course. They have military, google, microsoft, apple.. A few things still.

Good luck getting a job there, though.

BTW, the vast majority of Apples products are produced outside of the US.

[c1ue]

Re: the marginal utility of money

there is this theory in economics that the marginal utility of money decreases as you have more and more of it.

For example, 1M would mean a lot, but 10M would not.

I guess who wants to be a millionaire really plays up that point .. why bother with the next question if you've won enough money to pay off that bookie who wants to break your legs!

I think this also is why we're having an increasing disparity between the rich and the not so rich. A lot of our necessary needs are being taken care of. We live long lives and while extra medicare would be nice, it doesn't really make us live that much longer or better in some cases.

I don't agree with this statement either.

Food might be cheap, but what about housing?

If you're willing to live in a slum area, or in some other undeveloped/inaccessible/undesirable area, then your housing costs are low. But then your other types of services available are also low.

What about education?

Sure, you can home school your kids. But then comes college. Graduate work. Research labs and equipment.

And what about health care?

It is easy for anyone who makes above average per capita salary to say that downsizing works great and should be fine for everyone.

'Nuff said.

[blazespinnaker]

Re: the marginal utility of money

nobody said downsizing was good. In fact I feel the opposite, I think austerity is the wrong way to go and i am for redistribution of wealth.

This is not the point. The point is that people don't want to work more than a certain amount. The point is that the US does not and likely will not ever produce anything that anyone wants to kill themselves working for. Student loans are widely available for schools and most people are fine with that.

I agree there are some who have jobs they love or are natural workaholics, they will work themselves to death to buy all the nice toys and get their kids into the nice schools with no loans, but most people are not that way. They just want to get reasonable amount of security and a simple life and they are satisfied with that.

And why not? Why work yourself to death and waste your life at a job you hate just so you can have what some marketing suit thinks is a nice car.

This growing attitude leads to global over capacity.

[c1ue]

Re: the marginal utility of money

Student loans are widely available for schools and most people are fine with that.

This statement is true, but it (pan)glosses over the economic reality.

A student who takes on $40K in debt to become a teacher - is not a self sustaining reality.

A student who takes on $150K in debt in order to become a doctor - is likely more than a little concerned about finances.

And indeed, where then comes the richness of living in a supposedly prosperous 1st world society if the only choice in order to access higher education is massive, 1/2 generation long debt?

Are indeed the very wealthy to not only control our consumer choices via oligopoly of supply, our political choices via oligopoly of campaign finance, our information sources via oligopoly of media, but also our entertainment and education sources via only rich kids having the luxury to go into non-tangible-productive areas?

[jtabeb]

Re: the marginal utility of money

So as our ability to provide basic necessities increase (through efficiences, automation, globalization) I imagine that salaries are going to decline in REAL terms. Why? Because the real value of necessities are declining and because as i said above, once you've taken care of the requirements, do you really want to waste your life working for the man?

Me, I'd rather be out gardening, paddle boarding, hiking and just enjoying life with kids, wife and friends.

And it's taken us a long, LONG, time to get here. Let us be thankful that we have survived long enough to make it to this point. We still have numerous and serious challanges that we must invasively confront. We have triumphed in the past and can continue to do so AS LONG AS we maintain the capacity to summon the courage necessary to do the right things for the right reasons. No matter how much we improve, it will only show us how much MORE we must accomplish. And, most importantly, it will provide us a window of insight into what humankind is truely capable of acheiving.

[blazespinnaker]

Re: the marginal utility of money

This statement is true, but it (pan)glosses over the economic reality.

A student who takes on $40K in debt to become a teacher - is not a self sustaining reality.

A student who takes on $150K in debt in order to become a doctor - is likely more than a little concerned about finances.

And indeed, where then comes the richness of living in a supposedly prosperous 1st world society if the only choice in order to access higher education is massive, 1/2 generation long debt?

Are indeed the very wealthy to not only control our consumer choices via oligopoly of supply, our political choices via oligopoly of campaign finance, our information sources via oligopoly of media, but also our entertainment and education sources via only rich kids having the luxury to go into non-tangible-productive areas?

10 years isn't a big deal to pay back debt considering it gives you a life time career. i had large student loans (I studied abroad) and i paid them back. it was a minor irritant.

Student loan debt is fine. It's a sign of character and accomplishment. It's consumer debt we need to worry about.

[neoken]

Re: the marginal utility of money

My sentiments exactly, but you forget that we live in a world of diversity. Some will Always want the next fad, the next product, the next whatever is on tv.

I've lived a self imposed austere life myself, everything I own fits into a closet. Most people think this kind of life is crazy. In the period we are entering I think this will become more common though. Some will volunteer to live a simpler life, some will be kicking and screaming and blaming eveyone.

I'm sitting here writing this on an iPad waiting for my new iphone4 by the way. So I'm not immune to consumerism myself. I gotta have my toys man!

[c1ue]

Re: the marginal utility of money

10 years isn't a big deal to pay back debt considering it gives you a life time career. i had large student loans (I studied abroad) and i paid them back. it was a minor irritant.

Student loan debt is fine. It's a sign of character and accomplishment. It's consumer debt we need to worry about.

What was the ratio of your student debt to your 3rd year salary?

For a teacher with $40K debt, it is more than $1 of debt per $1 of salary.

10 year repayment is not going to happen.

For a doctor with $150K salary, 10 year repayment is more possible - especially if they get commission.

If anything, the above juxtaposition illustrates the TRUE marginal utility of money.

Secondly the cost of tuition across the board is rising far faster than any measures of CPI inflation.

Lastly I don't know about you, but my EE degree hasn't given me lifetime employment nor a career.

[Rajiv]

Re: the marginal utility of money

i had large student loans (I studied abroad) and i paid them back. it was a minor irritant.

What someone who graduated in the 1970's could do, was not doable fifteen years later. What was doable then, is not doable now. Wages have not kept up with inflation (even if I use BLS numbers instead of Shadowstat numbers) -- the only place where income has kept up and more? -- Rentiers and FIRE

[blazespinnaker]

Re: the marginal utility of money

My sentiments exactly, but you forget that we live in a world of diversity. Some will Always want the next fad, the next product, the next whatever is on tv.

I've lived a self imposed austere life myself, everything I own fits into a closet. Most people think this kind of life is crazy. In the period we are entering I think this will become more common though. Some will volunteer to live a simpler life, some will be kicking and screaming and blaming eveyone.

I'm sitting here writing this on an iPad waiting for my new iphone4 by the way. So I'm not immune to consumerism myself. I gotta have my toys man!

It's the only way to live. i think people are figuring this out. I actually think toys like iPad and the iPhone help. People start to put more stock in virtual / intellectual goods rather than pointless trappings of wealth.

Frankly, it's damn liberating too. All that material crap just weighs you down..

[charliebrown]

Re: the marginal utility of money

I attended U of Ill 1980 - 1986. First year tuition was 1.5K, Final year was 3K. Graduated with a MS in EE. Now I get letters from the alum society, stating tuition is now 18K. When I graduated I was offered a 30K a year software job. ergo 10x final year of tuition. Going to school was a no brainer as far as ROI, I am in the autumn of my career, 25 yrs later.
Now the median salary starting salary is 55K so ROI is roughly 3 times 1 year's tuition. So the equivalent 108K tuition bill now will take roughly 2yrs of salary to meet. Given the rate of change in the industry, I don't think a 2010 degree will last 25 yrs. There is tremendous pressure to out source for many reasons. Not of all of which are financial, the fortune 500 now also see an added benefit of reduced liability, as well as lower costs.

Student loans are NOT fine. We are making indentured servants out of our young people. I would like to go back to school to retrain, but at 18K a year, and the loss of income, this is not an option. How many other 40 somethings would like to
retrain, but lack the money and time?

If we are to keep pace with asia we must re-invent the university system. Maybe a 1 year crash course, for some kind of new technical degree, no B.S. courses/padding.